Huhtamäki Oyj

Good morning, all. Welcome to Hurtamäki's Q3 2025 results call. My name is Kristian Tammela, VP of IR. Today, we have, as usual, a presentation first by President and CEO Ralf Wunderlich, and then followed by our CFO Tuomas Gaust. And after the presentations, we'll have a lot of time for Q&As. So without further ado, let's get started in handing over to Ralf.

Thank you, Christiane, and good morning also from my side. Thank you for dialing in. And I'm starting with an overview, high level of the group. Very happy to share with you today that we saw profit improvements for the group, specifically driven by three segments, flexibles, fiber, and food service in what we see as still pretty volatile and soft market environment. Also happy to share that we have both in the quarter as well as here today seen strong volume growth in two of our segments, namely fiber and North America. The margin improved to now 10.3% in the quarter. And for the first time, all of our four segments delivered greater 9% EBIT margin. Headwinds from FX, especially the US dollar, persisted, impacting our top and bottom lines. We have seen a weak quarter in North America and will further comment on this in a bit when we come to the segment presentations. I'm also proud to see that our three value drivers continue to progress very well and are showing impacts. Let me use that. as a bridge then to the drivers. Driver number one is growth, and we want to use all levers which we have to drive profitable growth. First one, organic. Initiatives which we kicked off are very focused, and they are focused on both the JKAs, our global key accounts, as well as small and medium customers. especially the later one where we have a very small share with, are in focus and we are starting to build good relationships in all our segments. As I mentioned before, we have seen volume growth both in the quarter and year to date in fiber in North America. And of course, that's in a volatile and soft market. Very encouraging. On the inorganic side, We are proud to say that the integration of Selwyn Farms is tracking very well, and it's delivering both top line as well as bottom line as by promise. We are also managing our pipeline actively. It's a long pipeline, and as you know, we are focused on small bolt-ons, so that will take some time, and we will do that in a very disciplined way. Second point and second driver is capital discipline. After significant investments over the last years, and with very disappointing growth after those investments, we have started to be much more disciplined already at the back end of last year. We continue to be very disciplined, and we are going ahead with the guideline of 80-80-80-10, which is 80 million approximately for growth, 80 million for productivity, 80 million for maintenance, and 10 million for what we call license to operate. That context will continue. But we are ahead of our target, and we might end this year at a lower number, as you can see from the Q3 track which we have. Third driver for value for us is accountability. We have changed to now empower our segments. We will have faster decision making and faster speed of execution. We have also decided that tax and treasury will remain in the center and now procurement is also handled directly from the center for all our segments. The reason for that is that we will see direct bottom line impact by those three functions. All other functions are supporting the segments and are guiding, are reporting, are coordinating, are controlling and ensuring that at Hutamaki we have one language. Let me swiftly go to the business performance. And let's start with net sales. As mentioned, similar market conditions in Q3 as we had in H1, pretty volatile and very soft demand. With the FX impact now accelerating in the quarter and now over 4% or 44 million in the quarter alone, we have a very, very negative impact just from FX alone. And you see the acceleration by comparing quarterly numbers to year-to-date numbers, where year-to-date we are at approximately 2%, but in the quarter it was more than four as mentioned just a second ago. Our organic growth continues to be impacted and stands now at minus 0.9%, just under 1% year to date. Again, we'd like to stress that we are seeing volume growth in North America and fiber, and we are actively working also in the other segments to come back to volume growth. Good to see that Selwood, and that's what we call the acquisition line here, is delivering on the top line, as I mentioned before, also on the bottom line. Now looking at the profits, and we see that the adjusted EBIT was ascending at the quarter at 100.3 million. If we add the 4 million FX impact, then we would be in fact, 2% above last year quarter and spot on year to date, if again, including the FX impact, which for year to date is over 5 million. Our quarterly margin increased now to 10.3% and even year to date, we are double digit at 10.1%, which is again slightly ahead of year to date last year's margin. We're very proud to see our EPS growing 2% year to date. On a side note, if you would adjust the quarterly EPS by the currency, you will also have a 3% EPS growth in the quarter. Capital discipline is allowing us to have a very strong support from capital expenditure, which of course is positively impacting our cash flow. So you see that we are 26% down quarter over quarter on capital expenditure and 18% down year over year. Now going to the segment specifically. And as always, let's start with food service. The demand in food service remained unchanged versus H1. On the comparable FX, we are spot on last year. And I want to stress that because it's after eight quarters of decline. It's the first quarter that we are now back on being spot on with the prior. The increase in net sales came especially from Western Europe and Middle East Africa, supported by price and mix improvements. Adjusted EBIT is above 9% margin again, both in the quarter and year-to-date. This is, of course, also driven by cost focus, cost management, and margin management, and that will remain key. Our adjusted EBIT is 5% ahead of prior in the quarter and just at minus 2% year-to-date. And food service continues to focus on cash flow. And again, here capital discipline is supporting a very strong operating cash flow delivery. Now North America. North America had another strong volume quarter. And I want to stress that even though the North American numbers are disappointing, that the volume was strong in North America. And that was driven by a mix, by pricing and by volume. But pardon me, the mixed impact in the quarter was negatively, as the price impact was negatively. So volume positive and price mix negatively. So the total comparable growth in the quarter stands at minus 3%. Year-to-date net sales stands at minus 1%. So the disappointing EBIT was impacted by, as I mentioned before, by price, by mix, and by cost headwinds. specifically operating cost increases, transport, energy cost increases. I encourage you to look at the full year margin as again, the quarter was impacted by those very high impacted on the transport energy and other operational cost increases. So we are running at a margin of 11.4% year to date, which as anticipated already early in the year is driven, clearly driven by pricing, which we were holding on for two years after the spike of raw material prices in 22. So this is now the more normalized EBIT percentage, which we are seeing. Moving on to flexible packaging, where we have a much stronger story to tell. Even though the volume side continues to be soft, we continue to focus on price, mix, and turning around our underperforming units. And we are seeing in the quarter and year to date encouraging results on all of those elements. We have had unfavorable FX, but again, strong price and margin management. We were able to increase the EBIT in the quarter versus last year by 28%, with a very strong double-digit margin for flexibles in the quarter. However, here the EBIT absolute and relative was impacted by raw material decreases, which we will need to pass on on Q4. Hence, also here, I would encourage you to look at the year to date EBIT margin, which is more what we see our business currently traveling at. But even that one is two points ahead of what we have seen last year. So we are now at 8.8% margin. Flexibles also delivered very strong cash flow. And we also were very disciplined on the capital expenditure side. Let me move on to fiber packaging now. Fiber packaging continues to show very strong performances as they have done in the two quarters prior to that. Net sales was driven by volume, price and mix and resulted in a strong quarter with 9% growth and year to date even a double digit 10% growth. Net sales growth combined with cost management drove also very strong EBIT improvement, again, both in the quarter and year-to-date. Our margin stands now at 12.6% for the quarter and similar at 12.4% year-to-date. As fiber is performing very well, we continue to invest In fact, fiber is the only segment where we have seen growth in capital expenditure. This is again totally in line with our capital discipline, where we want to invest behind those segments which are performing very well. Thomas would like to pass on to you to give us an update on the financials.

Thank you, Ralf. And I'm starting off with the main topic, actually, for the quarter, and that is the currency. Currency and its negative translation impact to our results is visible clearly in both Topline and in... You can see it accelerating to 44 million net sales impact in the quarter, 4 million in EBIT, and year-to-date 66 million and 5 million on EBIT. I would like to remind you here that our P&L is valued at average rates while the balance sheet is valued at closing rates. So we see the impact immediately in the balance sheet while we come with the lagging to the P&L. Of course, the biggest currency impact will come from the USD. There we have a drop now of the USD to US. to a 1.12 average rate, while we in the closing rate already see the 1.17. Looking at the currency yesterday and today, we are roughly at 1.16. So USD obviously being a very important currency, but you can see that we are trending negatively on basically all currencies in the closing rates and only Thai baht and British pound is positive in the average rates. I would like to remind you also about that in our top 10 country revenues, we have only Germany and Spain denominated in euros. So, currencies are and will remain one of the core topics when it comes to translation of profits. So, the main impact in North America, but also in flexibles, you will see significant negative currency impacts. Then moving on to the more detailed P&L and adding on top of what Ralph said, we are still seeing tailwind in value add. Otherwise, I would say the core of our continued positive profit development operationally really comes from the activities we have done ourselves. You will find that on personal cost, we are still up year to date, but actually in the quarter we were trending already positively compared to prior year, just as one example. EBITDA is progressing ahead of EBIT, indicating that we are seeing a strong operational performance in our profitability, but also showing that we still have assets available for delivery. Other items in the P&L to address is the net financial items, where we had a few one-offs Last year, partly explaining the significantly lower finance cost. However, we are also moving downwards on finance cost from a structural point of view. The tax rate remains at roughly previous year's level, so we are 23.4% of tax rate. So, also there, a consistent delivery. So, if you look at the EPS, I would claim that despite the hit from the currency, we have made a good job at maintaining the EPS at roughly previous year's level on the quarter and actually improving year to date on EPS. Moving to the cash flow. Cash flow progress since the low Q1 has been good. We have now... You will also find in this bridge that the sort of... abnormal or non-operational items proceeds from selling assets and the CapEx part are balancing each other off. So one could say that the cash flow development comes purely from the operative activities as well as from lower taxes. So progress on cash flow We are anticipating also quarter four to be a positive cash flow quarter. So good development based on our capital discipline also in the cash flow on the cash flow side. Net debt EBITDA, you recall that we got an upgrade from S&P on our rating. We are nowadays a triple B minus company. That is really driven from the discipline we have seen on deal leveraging our net debt. We are at two in the end of the quarter. similar level as previous year and stay very focused on this key parameter. Gearing is at 0.65, and as you can see, we have sufficient cash and cash equivalents available at the amount of 328 million at the end of the quarter. On top of that, we obviously have our revolving credit facility available. Another element which we have been focusing on in order to be a predictable company is obviously working around our loan maturity structure. We have highlighted on this page the key events we have been going through this year. So in June, we signed a 150 million schuldschein. You recall that we entered an EMTM program for bond issuance program, and under that one, we issued our first bond in the quarter. And in connection to that one, we also set out a voluntary tender offer for repurchase of some of the outstanding bonds. So a disciplined approach in order for us to have a predictable maturity available in our loan facilities. Moving over to the balance sheet. In the balance sheet, obviously, the translation impact of currencies has a significant impact. You can see that alone in the equity line, we have a 232 million negative impact. I would also highlight that on the working capital, we are up roughly 60 million, And with that one, I would highlight that core items come from, for instance, receivables. So working through this balance sheet towards the end of the year will be core, including delivery of the inventory. Looking at then the return on investments, you remember me highlighting that this comes with a significant lag, so we are slowly but surely moving towards our long-term ambition, which is a 13% to 15% ambition on return on investments, adjusted return on investments. Beyond that one, we are Continuing now in the threshold of the 10 to 12 on adjusted EBIT, we are in line with our net debt EBITDA ambition. And as you recall, we have paid the dividend this year in line with our ambition as well. So the only part we are really still lacking is the comparable growth and with the comparable growth, we would also see a positive development into our return on investments. Our outlook and short-term risks remain unchanged. And with that one, I will then open up for Q&A.